You Can Cut Spending and Still Get Re-elected: Stephen L. Carter

It’s depressing to watch the
unfolding of yet another political season in which the parties
are united in their determination to keep public attention away
from the elephant in the room.

I refer to entitlement programs, the place the public’s
money really goes, and the driver of the future spending and
deficits that have Americans so justifiably terrified.

True, the refusal to discuss serious entitlement reform is
a very old problem, and all the deficit panels, official and
unofficial, that have proposed such changes wind up looking a
bit like the actors in Eugene Ionesco’s absurdist masterpiece
“The Bald Soprano”: When we reach the end of the play, we
realize that everyone is going to shift chairs and roles and
then start the story over again, line for line.

Conventional wisdom holds that entitlements are the third
rail of American politics: Touch them and you die (or the
political equivalent, which is to be voted out of office).
Republicans and Democrats agree with this premise. But a recent
paper from the National Bureau of Economic Research argues
persuasively to the contrary.

It studies the relationship between deficit reduction and
re-election (or reappointment) in the 19 nations, including the
U.S., that have been members of the Organization for Economic
Cooperation and Development from 1975 through 2008. The findings
are unambiguous: Governments that choose to cut spending to
close large fiscal deficits face no added risk of defeat in the
next election.

Results Are In

The paper compares large changes to the government’s fiscal
deficit (cyclically adjusted), in which the ratio of deficit to
gross domestic product falls by at least 1.5 percentage points,
and results of an election either during a period of deficit
reduction or within two years of its end. The paper concedes
that the factors that cause one government to fall and another
to survive are always complex. Nevertheless, the data provide no
support for the hypothesis that attacking deficits through
spending cuts reduces likelihood of re-election. (On the other
hand, consistent with earlier studies, it finds that using tax
increases to reduce deficits has a slightly negative effect on
the chances of re-election.)

Although there are many questions to be answered, the
authors -- Alberto F. Alesina of Harvard University, Dorian
Carloni of the University of California at Berkeley, and
Giampaolo Lecce of Bocconi University in Milan -- are careful in
their methodology. They test, and reject, the obvious competing
hypothesis that governments that engage in fiscal austerity are
already strong and survive for that reason. They offer a number
of case studies, from very different economies, to buttress
their conclusion.

If correct, their conclusion matters. Looming deficits in
the U.S. promise nothing but trouble. As everybody knows,
there’s a lot of money to be saved in entitlements. Indeed,
that’s where all the big budget savings are, had we but leaders
courageous enough to tackle them. Moreover, there are no
secrets. Raising the Social Security retirement age by one year,
to 68, would save $70 billion between now and 2030. Raising the
age by two years would save almost a quarter of a trillion
dollars. (All these data are drawn from the ever-helpful New
York Times deficit reduction calculator.)

A hard cap on Medicare growth at GDP plus 1 percent would
save over half a trillion dollars by 2030. (A hard cap means one
that the Congress does not undo every year, as in its current
silly practice, where members claim the savings one year and
then yank them away the next. A hard cap would probably be
easier to manage should Medicare be transformed into a health-
insurance voucher program, but that isn’t politically possible.)

Unpopular Positions

None of this is mysterious. Yet none of it is popular,
either. One side preaches that raising taxes on high earners
will fix everything, while the other insists that with tax cuts,
we can grow our way out of our mess. Neither party seems willing
to make a serious attempt at cutting actual spending,
particularly on entitlements, as witnessed by last year’s
embarrassing failure of the deficit-reduction supercommittee.

Maybe the nonaccomplishment should have been expected. An
important implication of the data presented in the paper is that
achieving fiscal stability is harder in “more polarized
political systems and fractionalized societies, where ‘deals’
and compromises are more difficult to reach quickly.” The
authors therefore suggest that “political consolidation of a
stable and secure cohesive majority may be a precondition for a
fiscal consolidation.” If so, we may be in more trouble than we
thought.

Yet the authors have done us an important service, inviting
us to cast away the notion that voters will punish serious
spending cuts. The question is whether our politicians will rise
to the challenge. Alas, watching the battle for the Republican
nomination unfold, one is reminded of the philosopher Michael
Sandel’s comment on Bob Dole’s 1996 presidential campaign: Dole
was making it too easy for Bill Clinton. Dole, Sandel wrote,
absolved Clinton of the challenge “to rethink progressive
politics or to grapple with the forces that, sooner or later,
will transform American political debate.” Sandel’s point was
that the Republicans never pressed the incumbent to deal with
even the obvious flaws of the progressive vision -- a
dialectical process by which progressive policies themselves
might actually have been improved.

It was obvious even 16 years ago that entitlement growth
was the great future challenge to U.S. fiscal health. But over
the years, each party has made it too easy on the other. We
constantly back away from serious conversation about Social
Security or Medicare, except to accuse the other party of either
gutting the programs or letting them explode the budget.

I am not suggesting that tax increases are always bad, or
that spending cuts are always good. But the elephant remains in
the room. The decision by both parties to ignore serious
entitlement reform may well be good politics. But it’s hard to
call it courageous, or leadership.

(Stephen L. Carter is a Bloomberg View columnist and a
professor of law at Yale University. He is the author of
“The Violence of Peace: America’s Wars in the Age of Obama,” and
his next novel, “The Impeachment of Abraham Lincoln,” will be
published in July. The opinions expressed are his own.)